The remaining two deflationary signs — deflation by government and the goods and services deflation that the Federal Reserve fears can't be far behind, given all the other areas where prices are already falling, says Shilling.

“Financial assets are sinking again under the weight of an increasingly recession-prone U.S. economy, a likely hard landing in China, and Europe's sovereign-debt crisis,” Shilling writes in The Christian Science Monitor. “That crisis and ratings downgrades are forcing down the value of sovereign debt and bank shares.”
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The 20-city house price index from S&P/Case-Shiller is down an average 4.2 percent from a year ago and 32 percent from its April 2006 peak, Shilling notes, and Moody's/REAL Commercial Property Price Index has dropped 43 percent from its October 2007 peak.

“The hard landing I foresee for China will erode, probably destroy, the basis for the global commodity bubble – namely, the conviction that China will continue to buy all the industrial and agricultural commodities in sight,” says Shilling.

Shilling points out that the unemployment rate, including those who have given up looking for work, is 16.2 percent, compared with the headline 9.1 percent. “Real median household income was down 7.1 percent between 1999 and 2010; it fell 2.3 percent in the last year alone,” he says.

And as for currency? “This form of deflation has arrived as the world rushes to the U.S. dollar,” says Shilling.

"As global deleveraging persists, all these prices will be marked down as the world struggles to find a new equilibrium," he says.

Reuters reports that Inflation is expected to more than halve over the next year as a spike in prices for goods like oil and grains unwinds.

Unemployment, meanwhile, will likely hold at nearly double its pre-recession level well into next year, keeping incomes under pressure.

Economist Gary Shilling says there are seven signs of deflation, and five financial assets, tangible assets, commodity prices, wages, and currencies are already here.
The remaining two deflationary signs deflation by government and the goods and services deflation...